Political Campaign Activities - Risks to Tax-Exempt Status

In return for its favored tax-status, a charitable nonprofit promises the federal government that it will not engage in “political campaign activity” and if it does, IRS regulations mandate that the charitable nonprofit will lose its tax-exempt status. This prohibition against political campaign activity (defined as “supporting or opposing a candidate for public office”) is SEPARATE from lobbying or legislative activities, which charitable nonprofits ARE permitted to engage in, although knowing the rules is important, as limitations apply.

“All charities…are absolutely prohibited from intervening in a political campaign for or against any candidate for an elective public office. If a charity does intervene in a political campaigning, it will lose both its tax-exempt status and its eligibility to receive tax-deductible charitable contributions.” – Source: IRS instructions for Schedule A, IRS Form 990

Nonprofits play an important role in helping to educate the public about issues that affect the community and those served, such as through voter education activities and candidates’ forums.

Learn how your nonprofit can safely get involved in voter engagement through the resources available at NonprofitVOTE.

Practice Pointers

Charitable nonprofits and foundations may not “participate in, or intervene in (including publishing or distributing of statements), any political campaign on behalf of (or in opposition to) any candidate for political office.” 26 U.S.C. Section 501(c)(3). This prohibition applies to any and all candidates for federal, state and even local elections. See IRS Regulations, Section 1.501(c)(3)-1(3) (iii).

If a candidate for public office approaches your nonprofit and asks to speak at a function, what should the response be? “NO” if the candidate plans to talk about his or her campaign; “Yes” if the candidate only talks about the charitable nonprofit and topics related to the mission, and if other candidates are also invited. Since it’s difficult to “control the message” when a candidate is speaking, many nonprofits avoid the risks involved in order to scrupulously maintain a nonpartisan position.

Some have observed that “once a candidate, always a candidate,” however, technically an individual who is an incumbent, and has not announced s/he is running for office, is not a “candidate.”

Organizations with substantial political or lobbying objectives may be recognized as tax-exempt under Code Section 501(c)(4). The rules that apply to 501(c(4) organizations are different from those that pertain to 501(c)(3)s, and permit 501(c)(4) tax-exempt organizations to engage in substantial lobbying, as long as it is “germane” to the organization’s program, among other limitations. (Nonprofit Law Blog)

Lobbying is NOT the same as political campaign activity. Engaging in lobbying by charitable nonprofits is permitted, but expending more than an “insubstantial” amount of energy or resources towards lobbying activities can be problematic. Charities that engage in a "substantial" amount of lobbying expose themselves to IRS penalties (“excise taxes”).

Learn how to protect your nonprofit while lobbying by making the “501(h) election”

Political activities and legislative activities are two different things and subject to two different sets of rules. (IRS)